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The Only Company That Can Overtake Apple (AAPL)

Apple Inc. (
AAPL
)
has been on a decade-long roll that is the envy of most corporate
executives.

Since 2003, Apple's revenue has grown at a 38.1% average
annual rate, swelling to $158.5 billion from $6.2 billion. EPS
has ballooned to $44.15 from $0.10 over the same period - a
remarkable 83.8% average annual growth rate.

At the same time, Apple's average share price has gone from
$9.45 to $557. This remarkable share-price appreciation has
lifted Apple's market cap to $515 billion from $6.9 billion
(based on average prices and average shares
outstanding).

The iPhone, the iPad, the iPod, the Mac … Apple hasn't missed
in many years, and its products continue to resonate with
consumers today. Apple's unrelenting success has led many to
tinker with the thought that it could be the first company to
demand a trillion-dollar market cap.

There is no denying Apple's success. Still, I wouldn't bet on
it becoming the first trillion-dollar company.

The same trillion-dollar chatter reverberated around
Cisco System (
CSCO
)
and
Microsoft (
MSFT
)
in late 1999, when the former's market cap was above $500 billion
and the latter's broached $600 billion.

History is replete with examples of hot technology stocks
faltering. Competition in the sector is fierce, and consumer
fatigue is a mitigating factor. The mini iPad and iPhone 5 are
terrific products, to be sure. But even they lack the "oomph" of
previous Apple releases.

So if not Apple, then who would I pick to be the first to
reach a trillion dollars?

Yes, ExxonMobil indeed trails Apple by $100 billion, but this
is a tortoise-and-hare race. Hares, which are often represented
by technology, tend to peter out. Tortoises, like integrated
energy, continually plow forward.

ExxonMobil is the number-one tortoise in integrated energy. It
rarely regresses, and when it does it quickly calibrates and
continues moving forward. From 2002 through 2011, ExxonMobil's
revenue grew at an 8.2% average annual rate, EPS grew 18%, and
market cap grew 5%.

These growth rates aren't terribly impressive when juxtaposed
to Apple's. Keep in mind, though, ExxonMobil generates $486
billion in annual revenue, which is three times Apple's annual
revenue. ExxonMobil is a huge enterprise.

Dividends will also help keep the needle moving forward.
ExxonMobil might well be the ultimate
dividend-growth
company. Its dividend history dates back to the days of the
Standard Oil Trust.

Over the past 30 years, ExxonMobil's
dividend
has grown at a 6% average annual rate. Over the past 10 years,
the average annual rate of growth has risen to 7.2%.

What's more impressive is the ease at which ExxonMobil can pay
and grow its dividend. In 2011, it paid $8.5 billion in
dividends. That's a big number, but it was only 22% of its net
income and only 36% of its free cash flow.

That said, the number-one reason I favor ExxonMobil over Apple
is that I know that 25 years from now the demand for oil will
continue to be robust. In contrast, I don't know if the demand
for iPhones or iPads will remain robust even five years from
now.

At the turn of the millennium, a
Nokia (
NOK
)
phone was the must-have mobile device. Over the past five years,
Nokia has been relegated to also-ran status by
Google (GOOG)
and Apple smart phones.

One doesn't have to think too deeply to imagine Apple
suffering a similar fate to Nokia, or, perhaps more likely, to
Microsoft. Microsoft is still a good company, but many of its
products and services have been supplanted in the consumer market
by hipper, more progressive offerings.

One also doesn't have to think too deeply to imagine another
publicly traded integrated-energy company supplanting ExxonMobil,
because there simply isn't one. ExxonMobil has been the big dog
in integrated energy for decades. I don't see that
changing.

That's why I'm placing my bet on ExxonMobil to be the first
member of the trillion-dollar market-cap club.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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